In traditional currency markets, stability is ensured by the participants and regulatory bodies. In decentralized markets, without a central governing body, the responsibility for monitoring supply and demand falls on the participants.
To attract users and avoid instability, special individuals called market makers are appointed to maintain a healthy trading environment.
Market makers are traders who follow specific rules. They conduct trades within set price and volume ranges to keep demand and liquidity stable.
Their main goal is to create a “live market,” directing investor funds efficiently and avoiding market disruptions.
Major firms like Citi, Barclays, JP Morgan, and Goldman Sachs are examples of market makers. Alameda Research was also one before the FTX scandal.
New cryptocurrencies often face price volatility due to unpredictable investor behavior, early selling, and low liquidity.
This can cause trading volume to drop and create large gaps between buy and sell prices, making the market unstable. To solve this, platforms hire market makers—either individuals or specialized companies like banks or brokers.
Suppose “CryptoCoin” launches and sees early excitement. Then, panic causes mass selling, and the price drops. Buyers struggle to find sellers at fair prices, making the market unstable.
A market maker steps in—buying from sellers and selling to buyers at close prices. This keeps the market liquid and price stable, helping the coin grow steadily.
Liquidity means the ability to quickly trade assets without big price changes. Market makers ensure there are always enough traders to keep the market active.
Large trades can disrupt illiquid markets. Market makers execute these trades behind the scenes to avoid price shocks and maintain balance.
Demand changes rapidly, like a cat’s mood. Market makers monitor and respond to these shifts, keeping prices stable and preventing sudden crashes or spikes.
Market makers are essential to the crypto ecosystem. They provide liquidity, prevent chaos, and stabilize prices—especially during a coin’s launch or high volatility periods.
Their presence reassures investors and allows platforms to function smoothly. Whether large investment firms or specialized brokers, market makers play a vital role in building a trustworthy and thriving crypto market.